Stopgap Government Funding Bill Raises Question on IRS Funding Cuts

While Congress was able to pass a short-term Continuing Resolution (CR) to prevent a government shutdown through December 20, it is unclear whether the IRS’ funding provided by the Inflation Reduction Act (P.L. 117-169) will be rescinded more than perhaps intended.

Late Wednesday evening, the House and Senate passed Continuing Appropriations and Extensions Act, 2025 (H.R. 9747) to avert a closure of federal agencies on September 30. In the House, the vote margin was 341-82 and the Senate approved the CR 78-18. President Biden signed the legislation the next day.

After contentious negotiations in the House over the inclusion of the now-scrapped requirement that those registering to vote to provide proof of U.S. citizenship — the three-month CR does not feature new major policy changes. But it seems to, however, unintentionally duplicate a one-off recission of IRS funding from the Inflation Reduction Act from the prior year, an issue flagged by Representative Linda Sanchez (D-CA), ranking member of the House Oversight Subcommittee.

In a September 25 letter to House Speaker Mike Johnson (R-LA) after H.R. 9747 advanced out of the House, Sanchez noted an agreement between President Biden and Republican lawmakers reflected in the Fiscal Responsibility Act of 2023 to reallocate $20 billion of the $80 billion IRS funding elsewhere.

Formally, the Fiscal Responsibility Act only rescinded $1.4 billion, but the original deal was to claw back $10.2 billion from the $46 billion marked for enforcement activities in the fiscal year 2024 appropriations, and another $10 billion a year later. During previous government shutdown negotiations at the beginning of this year, the arrangement was modified to take the full $20 billion out in fiscal year 2024.

“Due to the way the language is written in H.R. 9747, I am concerned that future appropriation bills using similar language could lead to an anomaly where $20 billion is continually cut from the IRS,” wrote Sanchez to the House Speaker. “I would like to ensure that any appropriations bills moving forward do not inadvertently rescind additional IRA funding.” Since $20 billion has already been settled, that deal “has been satisfied,” she added, therefore there “should be no further recissions.”

In the two years since the Inflation Reduction Act’s enactment, the IRS has been busy launching several focused but interrelated compliance enforcement initiatives in keeping with Treasury Secretary Janet Yellen’s mandate that any new actions using the additional funds only target individuals or businesses making $400,000 a year or more. Campaigns rolled out this year include those centered around partnerships, wealthy nonfilers, and abuses of corporate aircraft.

For those making less, audit rates will not raise beyond “historical levels,” the Biden administration has maintained. Sanchez told Johnson the IRS has collected $1 billion in taxes owed by “high-net worth individuals,” including 1,600 millionaires who owed more than $250,000.

In a White House statement Tuesday, the administration said it will “oppose any cuts or restrictions on the IRS in final appropriations legislation which would limit the IRS’ ability to crack down on wealthy tax cheats, and increase the deficit.”

According to Congressional Budget Office’s (CBO) score of the CR, the planned clawbacks “would result in fewer enforcement actions by the IRS and thus in smaller revenue collections.” In 2025, the cuts would result in a revenue reduction of $1.7 billion and total an estimated $65.8 billion through 2034.

“CBO expects that the IRS would prioritize enforcement activities that are expected to have the largest return,” read the cost estimate. “Thus, successive or combined rescissions of funding would result in progressively larger reductions in revenues.”